New USA medical employees will have new pension plan

View full size(Press-Register/Mike Kittrell)University of South Alabama Medical Center

MOBILE, Ala. -- New employees hired at University of South Alabama hospitals, clinics and physician offices on or after Oct. 1 will come under a new pension package. The university hopes that the change will reduce its costs by millions of dollars.

USA will no longer provide benefits under the Retirement Systems of Alabama to new employees at its medical facilities. Instead, it will offer a tax-deferred 403(b) match plan.

Current USA employees at the medical facilities can remain in RSA or switch to the new plan, according to USA officials. Approximately 2,400 employees will be eligible for the new plan.

USA spokesman Keith Ayers said the university is trying to address rising pension costs while still remaining competitive with other medical employers in the area.

The new plan gives employees the option of contributing up to 5 percent of gross salary to their 403(b), which USA would then match.

The government created 403(b) plans — which function much like the better-known 401(k) plans — for employees of educational institutions and nonprofits.

Under the RSA benefits, USA employees put in 5 percent of their gross salary and the university then contributes 12 percent.

Current employees who switch to the new plan and the 403(b) accounts would keep what they’ve invested in RSA and eventually start drawing RSA benefits, according to Ayers.

Ayers said while the RSA and 403(b) plans are both “very desirable” and “highly competitive,” the 403(b) has a shorter vesting period of three years, as opposed to 10 years in RSA.

An employee who left USA after three years could still take the money that the university had matched, he said.

Marc Reynolds, deputy director of RSA, said he understands that the university is “in a tough situation because they have to hire nurses and employees and be competitive with the private sector.”

Reynolds said that RSA doesn’t “have a problem” with USA’s decision to create another pension plan, as long as it involves only the medical employees.

Springhill Medical Center offers its employees a 401(k) plan in which the employee contributes up to 5 percent and the hospital provides 3 percent, according to Jeff St. Clair, Springhill’s president and chief executive officer. “I’m under the impression it’s fairly competitive with everyone around here,” St. Clair said.

USA’s medical employee benefits cost the school $33 million last year, with $15 million of that going to retirement and pension benefits, Davis said.

Ayers said with the new pension plan, the university “expects to save approximately $3 million the first year.” That amount, he said, would increase in following years.

USA HealthCare Management LLC, a limited liability company created by the USA board of trustees, will manage and operate the university’s health care enterprises.